Google, Facebook not forthcoming about local profits

When you have global dominance, it’s the local skirmishes that are often the most revealing.

Why?

Because local quickly becomes global, and reputational damage spreads extremely fast. It’s why the cat-and-mouse game between Google, Facebook, and Australia’s politicians was recently so intriguing.

Facebook and Google appear to be more financially successful than they admit to being.

The lead tormentor was a former lawyer named Nick Xenephon, who became a politician when he saw the social damage poker machines were creating in his state. So, the potential economic and social damage caused by the rampant spread of Silicon Valley goliaths wasn’t a big stretch for him.

Australia’s media buyers believe Google makes about AUS$3 billion in local revenue and Facebook about AUS$1 billion. Investment bank Morgan Stanley agrees with the media buyers. But Google and Facebook reckon they only make one-third of those estimates. Finding someone to believe them isn’t easy.

Take this exchange between Xenephon and Jason Pellegrino, Google’s Australia and New Zealand managing director:

Xenophon: “Mr. Pellegrino, I hate being misled. When you say that you have AUS$1.1 billion in revenue here in Australia … does it include the revenue that goes through overseas companies such as offshoots of Google in Singapore and other jurisdictions?”

Pellegrino: “To the best of my knowledge, all the revenue generated in Australia is generated through our Australian business and represented in that figure.”

Xenophon gave him one more chance to find the missing AUS$2 billion in ad revenue.

Pellegrino: “Senator, I’m not in a position to speculate on those numbers. We have a policy globally of not reporting numbers in a specific country, and I’m not in a position to break that down any further.”

Xenophon: “This is really upsetting me, Mr. Pellegrino, because journalists are being laid off seemingly on a weekly basis in this country. You’re telling us that Google only takes in AUS$1.1 billion in advertising revenue when the advertising industry is saying it’s more like AUS$3 billion. Can you categorically say … it is only AUS$1.1 billion? Are you absolutely sure?”

At this point, Google’s head of public policy, Ishtar Vi, dove in to help out his colleague: “The 2016 accounts which Jason is referring to reflect a transition year as we restructure our business.”

So, the company that built the phenomenal search engine we all use every day to find answers so easily can’t even figure out how to pull a simple revenue number from its own internal excel spreadsheets.

Facebook’s time facing Xenophon was equally entertaining and frustrating.

The executive who drew the short straw to face the inquiry was Áine Kerr, the company’s head of global journalism partnerships. (Kerr was a former Storyful co-founder who left Facebook soon after the Australian inquiry to start a new venture back in Ireland.)